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Gold tested yesterday's lows near $1,725/oz in early trading in Asia prior to ticking higher to
$1,740 towards the end of the trading day with surprisingly strong inflation
figures from China helping.

Gold corrected to $1,730/oz
as markets in Europe opened and has traded in a range between $1,730/oz and $1,740/oz since.

It is believed that Greek political leaders are still
holding out with regard to pension cuts. Market participants are again
looking for some closure today. Failure could lead to a sharp bout of
risk aversion.

A resolution will boost the euro against the dollar and
gold short term but with Greece remaining fundamentally insolvent the latest
exercise in ‘kicking the eurozone can down
the road’ will not restore confidence in the euro in the long term.

Gold Spot $/oz 3 Days
(Bloomberg)

The European central bank has a rate decision out today
at 12.45 GMT and interest rates are expected to remain at record lows, near
0%, supporting gold.

Bank of England Governor Mervyn
King looks set to engage in more QE by injecting another 50 billion
pounds, nearly $80 billion, into the U.K. economy today as he ramps up
protection for a nascent recovery from the threat posed by Europe’s
debt crisis.

More QE by the BOE and loose monetary policy by the ECB
is gold bullish.

China's annual inflation rate (CPI Index) accelerated
to 4.5% in January, surprising market expectations and breaking a five-month
trend of easing price pressures. Consumers hitting the shops hard
spending during the Chinese Lunar New Year holiday break may have contributed
to the inflation.

The inflation jump in the world’s second-largest
bullion consumer, China, should lead to continuing demand for bullion there.

“Gold will rise to $2,500/oz
and commodities will plummet if the euro area starts to break up, “said
Capital Economics yesterday.

“Greece may leave the system this year, followed
by Portugal and Ireland in 2013, "Julian Jessop, chief global economist
at the macroeconomic consultancy, told a conference in London on Wednesday.

A drop in commodity prices could be "pretty
bad" if the Eurozone breaks up, while smaller than the 2008 collapse.

Gold and silver will rise, he said. "It's almost
certainly bad for all commodities, excluding gold and perhaps silver as a
safe haven," Jessop said.

European Central Bank governing council member EwaldNowotny said last month
he "can't be sure" Greece will be able to stay in the single
currency, while some economists including NourielRoubini have said that the country may leave the euro
within a year.

Greece, facing a 14.5 billion-euro ($19.2 billion) bond
payment on March 20, is struggling to arrange financing to avert a collapse
of the economy, risking a new round of contagion in the euro area.

In the longer term, the breakup of the euro could be
"very positive" for the global economy and commodity prices, Jessop
said, as peripheral countries and Germany would have greater freedom to set
their economic policies.

OTHER NEWS(Bloomberg) -- South African Gold Output Fell 8.2% in December From
Year Ago
South African gold production fell 8.2 percent in December from a year
earlier, Statistics South Africa, said by phone from Pretoria today.

(Bloomberg) -- South Africa Mine Output Rose 0.9% in
December From Year Earlier
South African mine production rose 0.9 percent in December from a year
earlier, Statistics South Africa, said by phone from Pretoria today.

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Mark O'Byrne is executive and research director of www.GoldCore.com which he founded in 2003.
GoldCore have become one of the leading gold brokers in the world and have over 4,000 clients in over 40 countries and with over $200 million in assets under management and storage.We offer mass affluent, HNW, UHNW and institutional investors including family offices, gold, silver, platinum and palladium bullion in London, Zurich, Singapore, Hong Kong, Dubai and Perth.